When you hear the phrase “real estate” you don’t commonly think “thriller plot.” Yet in Moscow, where prices are high, lawlessness in the private sector is rife, and the police are frequently too overwhelmed to pay any attention to what’s going on in the property market, any real estate deal could potentially land one in a situation more akin to an episode of “Law & Order.”
In order to discuss just how bizarre the so-called real estate scene around here truly is, I sat down with a glamorous woman whom I’ll call Alina – she is a real estate agent and, as she says it herself, “one of the good guys.”
NA: So how long have you been working in Moscow as a real estate agent?
A: Oh God, it must be going on a decade now. I had just graduated from college in St. Petersburg, I was broke, and a friend’s husband told me to pack my bags and come down to Moscow and work for his real estate firm.
NA: You’ve mentioned before that your initial sojourn into the world of Moscow real estate didn’t exactly go as planned. Would you like to elaborate?
A: Well, my friend’s husband was also one of the good guys, you know, he was trying to do business the honest way. He was forced out of it – his firm was essentially taken over by very shady people. I was threatened on the phone, I was followed several times. This was right after I had moved to Moscow, literally a few months after the fact, I was so unprepared for it, I was terrified. Looking back on it, I think we were all lucky that none of us were killed. And that was a time when Moscow was shedding it’s “crime capital” reputation somewhat.
NA: As I understand it, crime in Moscow is going down – but the real estate market is something else entirely.
A: Well yes, essentially, it exists in its own little niche, where everyone plays by their own rules. The market is essentially a “gray” market through and through – when you have so many people dodging taxes, virtually everything that happens, every deal, is only “semi-official.”…No one is even bothering to seriously regulate it, because they know what a nightmare it is.
NA: Are you involved in semi-official deals?
A: No, I’m lucky to work for a very big firm now, we deal with the luxury end of the market, that’s its own niche.
NA: And were you trained at all before you started working in this profession?
A: No, not at all! Not at first, anyway. I did some coursework eventually, but that came much later. In general, most people working as real estate agents in Moscow have no training whatsoever – at least, not at first. The lack of professionalism is practically absolute. Most of these people are only qualified to sell pirozhki at the bazaar, if you know what I mean. It was different for me straight away, because I had a university degree in economics and connections – but even I’ll admit that I was unprepared at first.
NA: So how did you get from being followed in the street by thugs to working on the luxury real estate market?
A: I got lucky. After that initial experience, I was totally broke once again, I was renting a room at the time, I thought, “I won’t be able to pay rent next month, I am probably done here.” But one of the lawyers who dealt with the original firm that was taken over remembered me, saw some potential in me, introduced me around. I spent time working for different firms, building up a reputation. Reputation is everything around here – it’s all via word-of-mouth, there are no official databases for real estate agents. People just want to deal with someone honest and more or less competent, so they will ask friends and relatives for contacts and that’s how, slowly, you move ahead.
NA: How’s your friend’s husband? How’s your friend? Are they doing alright after what happened?
A: Yes, eventually, they moved on. They’re still together, actually, which is good, because for a lot of families, when the family business is lost, all of this acrimony sets in – but it made them stronger. They were also very lucky, I think.
NA: How does one just take over a real estate firm? It’s not a hostile takeover in the official sense, right?
A: There is this practice called “raiding” in Moscow, it’s actually very common. There are many schemes that raiders use in order to take over a business. Sometimes, corrupt officials in law enforcement are in on it, sometimes not. In the case of my friend’s husband, he was eventually given a choice, go to prison on fake charges or sign over the firm.
NA: Yikes.
A: Yeah, shootings aren’t nearly as common now, as the criminals know how to use the criminal justice system against their victims. So in that sense, he was lucky once more. But then again, who wants to end up in a Russian prison?
NA: Nobody.
A: That’s right, nobody. And it’s very easy for a businessman to end up in prison. Because the [Russian] legislation is so confusing and often contradictory, and because if you wind up in court, you basically will end up with a guilty verdict no matter what.
NA: You know, I keep writing about that. Especially about the guilty verdicts. The judges basically don’t want to ruin the close ties they have with the prosecutors, so they hardly ever acquit anyone. It’s a big problem.
A: Yeah, you never want to end up in criminal court in Russia. Never ever.
NA: Do you think that will ever change? Do you think the system could become better?
A: [Laughs] Maybe for our grandkids.
NA: While we were setting up this interview, you told me that you were a “little jaded” by the local real estate market. Even though you’re a success story. Would you like to talk more about why you feel jaded?
A: I think I’m jaded because of all the people I encounter. All of the unprofessionalism I see. So many cases of people getting duped… If you look at [real estate] listings, even the legitimate-seeming ones, you then must sit there and calculate how many are fraudulent. How many people will get ripped off as the result. I wish they had police officers just browsing that site, taking notes.
NA: How do people commonly get ripped off on the Moscow real estate market?
A: To an individual buyer, all sorts of things can happen. For example, take a look at Russia’s registration laws – they can be a real challenge. For example, let’s say you buy an apartment on the so-called secondary [market], so it’s not brand new. You’ve bought it, everything seems OK. Suddenly, some guy who is registered there shows up. Let’s say he was in prison, now he’s out, he’s saying that his rights were violated… The entire deal could be annulled – and who knows if you’ll get your money back.
Or how about this – you buy an apartment from a nice old lady, and after the fact find out that she’s been declared legally insane? Happens all the time. Suddenly, the deal is annulled, you don’t have any rights to the apartment. But good luck trying to get your money back, more often than not, third parties were in on the deal all along, just waiting to run off with a large portion of the cash.
… And it’s not just the secondary market. Hell, let’s say you’re an investor, you want to buy several apartments in a building where construction has just finished. Everything seems to be going great, and suddenly local authorities will say, “We’re not signing off on this building, it won’t have gas or water, it’s not going to be on the map, construction was not completed in a satisfactory manner and in accordance to the law.”
NA: That usually means that someone wants a bribe, right?
A: Exactly. Bribes, kickbacks, it can all be part of the package. You get involved in this business – you’re basically navigating a maze of legal and financial dead ends. And the stakes are often much higher than elsewhere, because of how high the prices are.
NA: Yeah, I’ve noticed that in Moscow, prices are high, and you don’t exactly get a whole lot of bang for your buck, as we say in the States. You need at least 5 million rubles (around $150,000) to buy anything in the city that is considered “decent” – and “decent” in this case often means a one-bedroom, in a khrushchyovka (Khrushchev-era apartment building with low ceilings and other depressing features) on the outskirts of town.
I have a theory that prices are so high because Moscow is home to at least 79 billionaires, as Forbes said. I think they drive the prices up.
A: Yeah, some say the prices are unsustainable and that the market could, eventually, collapse. I’m more optimistic than that. But who knows, right? I’m just plowing ahead the best way I know how.
NA: As we all are.
A: [Laughs] Such is life. But when you’re plowing ahead, it pays to have the right people next to you. This business, and Moscow in general, is all about having the right connections. Not just in terms of powerful people – but in terms of honest people. Having honest friends – that’s the most valuable thing there is.
NA: That’s beautiful. Thank you.
Photo by SergeyRed, licensed under a Creative Commons Attribution-ShareAlike 2.0 Generic license